Book contents
- Frontmatter
- Contents
- Acknowledgements
- List of Contributors
- 1 Introduction
- 2 How Financial Liberalization Led in the 1990s to Three Different Cycles of ‘Manias, Panics and Crashes’ in Middle-Income Countries
- 3 Timing the Mexican 1994–95 Financial Crisis using a Markov Switching Approach
- 4 Exchange Rates, Growth and Inflation: What If the Income Elasticities of Trade Flows Respond to Relative Prices?
- 5 Alternative Measures of Currency and Asset Substitution: The Case of Turkey
- 6 Competitive Diversification in Resource Abundant Countries: Argentina after the Collapse of the Convertibility Regime
- 7 Foreign Portfolio Investment, Stock Market and Economic Development: A Case Study in India
- 8 Transnational Corporations and the Internationalization of Research and Development Activities in Developing Countries: The Relative Importance of Affiliates in Asia and Latin America
- 9 External Debt Nationalization as a Major Tendency on Brazilian External Debt in the Twentieth Century: The Shifting Character of the State during Debt Crisis
- 10 Prudential Regulation and Safety Net: Recent Transformations in Brazil
- 11 Re-crafting Bilateral Investment Treaties in a Development Framework: A Comparative Regional Perspective
7 - Foreign Portfolio Investment, Stock Market and Economic Development: A Case Study in India
Published online by Cambridge University Press: 05 March 2012
- Frontmatter
- Contents
- Acknowledgements
- List of Contributors
- 1 Introduction
- 2 How Financial Liberalization Led in the 1990s to Three Different Cycles of ‘Manias, Panics and Crashes’ in Middle-Income Countries
- 3 Timing the Mexican 1994–95 Financial Crisis using a Markov Switching Approach
- 4 Exchange Rates, Growth and Inflation: What If the Income Elasticities of Trade Flows Respond to Relative Prices?
- 5 Alternative Measures of Currency and Asset Substitution: The Case of Turkey
- 6 Competitive Diversification in Resource Abundant Countries: Argentina after the Collapse of the Convertibility Regime
- 7 Foreign Portfolio Investment, Stock Market and Economic Development: A Case Study in India
- 8 Transnational Corporations and the Internationalization of Research and Development Activities in Developing Countries: The Relative Importance of Affiliates in Asia and Latin America
- 9 External Debt Nationalization as a Major Tendency on Brazilian External Debt in the Twentieth Century: The Shifting Character of the State during Debt Crisis
- 10 Prudential Regulation and Safety Net: Recent Transformations in Brazil
- 11 Re-crafting Bilateral Investment Treaties in a Development Framework: A Comparative Regional Perspective
Summary
Abstract
The objective of this study is to examine the impact of Foreign Portfolio Investment on India's economy and industry. As FPI essentially interacts with the real economy via the stock market, the effect of stock market on the country's economic development will also be examined. The findings of this chapter show that the perceived benefits of foreign portfolio investment have not been realized in India. From the results of this study it can be said that the mainstream argument that the entry of foreign portfolio investors will boost a country's stock market and consequently the economy, does not seem be working in India. The influx of FIIs has indeed influenced the secondary market segment of the Indian stock market. But the supposed linkage effects with the real economy have not worked in the way the mainstream model predicts. Instead there has been an increased uncertainty and skepticism about the stock market in this country.
On the other hand, the surge in foreign portfolio investment in the Indian economy has introduced some serious problems of macroeconomic management for the policymakers. Uncertainty and volatility associated with FPI have not only reduced the degrees of maneuverability available to the policymakers but have also forced them to take some measures which impose significant fiscal cost on the economy.
Though this study focuses on India and draws policy implications based on the Indian experience, the results and policy implications of this study can be used to draw lessons for other developing which are at the same or similar level of development.
- Type
- Chapter
- Information
- Capital Without BordersChallenges to Development, pp. 121 - 146Publisher: Anthem PressPrint publication year: 2010
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